Horizons- June 2013

Posted on July 3, 2013 by


MANAGING RISK IN AN INCREASINGLY COMPLEX ENVIRONMENT

The electricity sector in India has changed tremendously in the decade that has now passed since the introduction of the Electricity Act. There are more challenges but also better understanding of various aspects among stakeholders. Opening up of options on the supply as well as demand side has brought alternatives for investors. Due-diligence of regulatory and commercial aspects promises to mitigate major project risks.

Increasing maturity of Electricity Sector in India 

The Electricity Act passed in May 2003 provided impetus for far reaching changes in the electricity sector in India.

Structural reforms – Generation, distribution and transmission sectors were segregated into different businesses. ERCs were formed at the Central and State level to form regulations and resolve the disputes. Generation was de-licensed to promote private participation.

Improvement in Supply Diversity – Focus of power generation has shifted from being solely a central government dominated subject.

Share of sectors in total installed capacity

Today, states and private producers contribute to bulk of capacity. Large captive capacity has come up to cater to  power intensive industry requirements. Power trade at exchanges has achieved greater penetration. Inter-state trade has picked up; intra-state trade is expected to follow.
Promoting Competition & Greater Efficiency –ERCs have encouraged greater discipline in reporting and tariff setting. Their duties of balancing multiple stakeholder interests have become onerous due to supply shortage.

Electricity Efficiency

However they have succeeded in substantially reducing technical and commercial losses as well as promoting alternative sources of energy, primarily wind and solar power.

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